Recovery hinges on stimulus funds—think tank

HOPES for a quick V-shaped recovery are dimming as a local think tank now projects that the P1.3-trillion stimulus package has yet to be approved and spent.

In its latest Market Call report, First Metro Investment Corp.-University of Asia and the Pacific (FMIC-UA&P) Capital Market Research said bulk of the stimulus package can only be spent in 2021.

The think tank said the country’s recovery from the coronavirus 2019 (Covid-19) pandemic relies on the ability of the government to spend the stimulus. It is expected that the measure can only be approved in August.

“A V-shaped recovery may not ensue unless the government can start spending fast its new stimulus package of some P1.3-trillion [approval may come only by August] and ability of firms to restore and strengthen their supply chains and provide safe work environments for their workers,” FMIC-UA&P Capital Market Research said.

The think tank said consumer spending is not expected to recover soon, since firms may still feel the need to save more for “unexpected adverse events.”

These include a second wave, which the think tank does not think likely; typhoons which are prevalent in the second half of the year; and the slow delivery of financial support to Filipinos from the government.

This dampens demand and is the reason for FMIC-UA&P Capital Market Research to project a benign inflation despite the recent increase in oil prices.

“Even though crude oil prices have soared in June, these will remain still 40 percent below those [prices] a year earlier. Food prices may only have a slight uptick as removal of strict quarantine mandates would allow faster restoration of supply chains and transport services. Thus, we see limited upside for headline inflation in Q3 [third quarter],” it said.

However, the think tank said it already expects positive growth in the third quarter and near-normal growth in the fourth quarter.

It also expects that the employment data to be released by the Philippine Statistics Authority (PSA) in September will not be as grim as the April data, which revealed 5 million Filipinos became unemployed during the period.

This optimism, the think tank said, is supported by the gradual easing in lockdowns particularly in Metro Manila and Central Luzon. The recent transition to general community quarantine (GCQ) and better of these areas has freed up about 62 percent of GDP.

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